What is prepared by the lender if the borrower is assuming the current seller's loan?

When a borrower assumes the current seller's loan, the lender prepares a mortgage reduction certificate. This document verifies the outstanding balance of the loan being assumed and states whether the loan is current. It essentially provides the assumption of the mortgage, confirming the terms and remaining amount that the new borrower will take over. This is important as it outlines the borrower’s responsibility and the lender’s rights regarding the existing loan.

In this scenario, the mortgage reduction certificate helps to ensure that all parties involved—both the seller and the new borrower—are aware of the current loan condition, which is crucial when transferring the loan obligations. Additionally, this certificate may include details about the interest rate, payment history, and any other pertinent information that would affect the assumption process.

While the other documents mentioned, such as a loan application, truth in lending disclosure, or settlement statement, serve important roles in real estate transactions, they do not specifically pertain to the act of assuming an existing loan. The loan application is for initiating a new loan, the truth in lending disclosure pertains to the costs of borrowing, and the settlement statement outlines the details of the closing; none of these directly address the assumption of the seller's mortgage like the mortgage reduction certificate does.